NEW YORK--Stung by weakness in apparel and higher costs, profits at Spiegel Inc. tumbled 64.4 percent in the third quarter before year-ago charges. In the quarter ended Oct. 1, the catalog giant earned $2.8 million, or 3 cents a share, down from $7.9 million, or 8 cents, before a $21.9 million charge to close distribution facilities. The charge resulted in a net loss of $7.2 million. The company has built a new distribution facility to handle Eddie Bauer and Spiegel catalog operations.
Sales advanced 18 percent to $649.4 million from $550.3 million. Same-store sales at the Eddie Bauer retail operation increased 5 percent versus 14 percent last year.
John J. Shea, vice chairman, president and chief executive officer, said the company continues to see consumers "spend more freely" on home-related merchandise such as domestics, home decor and electronics.
"Demand in apparel remains strongest in casual clothing, a category Eddie Bauer serves extremely well. Weakness was seen in apparel and accessories geared to cold weather. However, we expect to see demand for these items rebound as the weather returns to normal," Shea said.
A shift in sales mix from apparel toward home goods caused gross margins to slip to 32.1 percent of sales from 32.3 percent.
Selling, general and administrative expenses increased to 36.7 percent of sales from 34.5 percent, reflecting planned expenditures to build its customer base and costs for the new catalog-distribution facility.
The company said Eddie Bauer is now shipping all its catalog merchandise from this new distribution center while Spiegel is shipping selected departments. Shea said the firm expects to complete the transition in the first quarter of 1995 and looks for this to help by cutting costs in the second half of 1995.
In the nine months, earnings increased 7.4 percent to $15.8 million, or 15 cents a share, from $14.8 million, or 14 cents, a year earlier before the charge. The distribution-center charge led to a year-ago net loss of $7.1 million.
Sales gained 24.3 percent to $1.95 billion from $1.57 billion, with sales at the Eddie Bauer retail operation up 10 percent against a 15 percent gain.
In September, the company sold $150 million of its credit-card receivables to manage its balance sheet, reduce debt and help finance the growth in proprietory receivables. These grew 21 percent in the third quarter to $212 million, reflecting strong overall credit sales
--Fairchild News Service

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